Jameel Ahmed, the governor of the State Bank of Pakistan (SBP), expressed hope on Wednesday that the situation of Pakistan’s foreign exchange reserves would strengthen as the nation is anticipated to experience capital inflows in the coming days.
The SBP governor stated in his talk to the Federation of Pakistan Chambers of Commerce and Industry that “we are expected to witness inflows from next week forward, which will reduce pressure on our foreign exchange reserves”.
Ahmed expressed his commitment to addressing the issues of industrialists and said that the FX reserves of the country have depleted to a low level. “However, we will see a surge in reserves as projects in the pipeline will soon start to materialize, which will improve our capacity to facilitate businesses,” he said.
According to the most recent SBP data, the central bank’s foreign exchange reserves dropped significantly by $1.23 billion, to a critically low level of $4.34 billion. SBP’s reserves are at their lowest point since February 2014.
The country held $10.19 billion in liquid foreign reserves, and commercial banks kept $5.85 billion in net foreign reserves.
To the dismay of many importers and firms in Pakistan, who cited these limits as a rationale for closing or reducing operations, the SBP imposed restrictions early this year due to the low level of reserves.
According to Ahmed, the SBP facilitated shipments under the headings of necessities, energy, and industries with a focus on exports, agricultural inputs, deferred payment / self-funded imports, and imports for export-oriented projects that were almost finished. Prior to this, the central bank had agreed to remove import restrictions beginning January 2, 2023.
“Our capacity to export will build up only after we complete export-oriented projects, thus we have facilitated the timely completion of these projects,” he said.
“We want to facilitate all the industries, however, we can only do so under our given capacity of inflows. We do not produce dollars locally, they come through exports, remittances, and inflows from lenders,” said Ahmed.
“We are focusing on improving our capacity, and are also taking administrative intervention to bring our imports on a reasonable level,” he added.
The SBP chief said evaluating the Letter of Credit (LC) is a time-consuming exercise. “We have cleared 33,000 LC cases,” he said. He added that steps had been done to control the current account deficit and that the central bank was aware of issues facing the business community.
The governor stated that an action plan in this regard will soon be launched after the SBP carefully evaluates the business community’s ideas. He gave the business community his word that the central bank would see to it that bank LCs with terms of 365 days or more were approved. The SBP will ensure it, he added, if you have arranged a project loan but the LCs are not being opened.
The SBP had recommended banks compel the retention of 35% of their export receipts in special foreign currency accounts in order to encourage IT companies and independent contractors to bring their foreign exchange earnings into the nation.
Ahmed added in his address, “We are hoping that the issues in the IT sector will be rectified, and as a result, our exports from the IT sector will increase.”